South Africa aiming to become top destination for business travel

Although South Africa’s scenery, wildlife, beaches and wine have kept leisure tourism as the sector’s key contributor, business tourism is on the rise. Recognised as an important untapped segment within the powerhouse that is South Africa’s tourism industry, business tourism has become a key priority for the government in recent years, and it is hoping that by targeting business travel, the number of meetings, incentives, conferences, and exhibitions (MICE) events will increase over the next five years.

Already a leading MICE destination within Africa, South Africa is aiming to expand its horizons beyond MICE leader Cape Town to include other major cities such as Johannesburg and Durban, thus setting the stage for new growth in what is becoming an important segment of the tourism industry. However, new visa restrictions which will impact on visitors from China – one of the nation’s most important tourism markets – will present considerable challenges to MICE growth in the near term.

MICE Growth

Offering 1700 MICE venues, the largest of which can accommodate over 20,000 visitors, and standing as one of Africa’s leading economic centres, South Africa is a prime destination for MICE events, and the business segment has shown rapid growth. According to a 2014 report by professional services firm PwC, the number of non-holiday foreign visitors to the country rose by 125% between 2009 and 2011, and a further 86% in 2012, before moderating to 5% in 2013, for a total of 171,000 visitors “We’ve got to look at where those numbers are coming from to get a clearer picture. When someone arrives in South Africa, Customs will ask if they are a leisure or business traveller. The majority of business tourists would say they’re leisure arrivals because they’re worried about having to obtain a special visa, so the numbers are likely to be quite a bit higher than official figures indicate,” Martin Jansen van Vuuren, the director of tourism at Grant Thornton, told OBG.

Despite comprising a relatively small proportion of total visitor arrivals, business travel spending is high – the World Travel and Tourism Council (WTTC) reports that business travel in 2014 generated R83.6bn ($7.22bn), or 34% of direct travel and tourism GDP, and is expected to grow by a further 2.1% in 2015.

South Africa rose two spots to become the 32nd largest international events destination according to the International Congress and Convention Association’s (ICCA) 2014 country and city rankings, released in May 2015, ahead of Hong Kong, the UAE, New Zealand and Morocco. The rankings are based on the number of rotating international association meetings hosted in major metropolises worldwide. Eligibility criteria stipulate that association meetings must be held on a regular basis, have at least 50 delegates and rotate between at least three countries.

The country has benefitted significantly from MICE tourism in recent years; the Cape Town International Convention Centre reported adding R2.99bn ($258.34m) to the economy, and over R1bn ($86.40m) of Western Cape revenues between 2003 and 2013, while the Convention and Events Bureau (a division of the Johannesburg Tourism Company), announced in 2011 that the city had been selected to host conferences estimated to bring $28.5m in direct and indirect economic benefits. The government reports that South Africa will host over 200 international conferences between 2014 and 2019, attracting around 300,000 delegates and injecting more than R1.6bn ($138.24m) into the economy.

Government Support

The government has increasingly recognised the need to promote and enhance its business tourism sector, and has established a number of new policy initiatives aimed at expanding the MICE segment in recent years. In 2012 authorities began setting up the South Africa National Conventions Bureau (SANCB), an entity focused solely on the promotion of MICE travel. SANCB acts as a one-stop shop for meeting planners and MICE travel organisers considering an event in South Africa. It offers a range of services such as bid promotion, independent consultancy, government letters of support, lobbying and promotional support, event marketing and sponsorship development.

Tourism Act

In 2014 the government signed the new Tourism Act into law, thus officially incorporating the National Tourism Sector Strategy in a bid to promote new tourism opportunities. In addition to ensuring quality tourist services, the act also targets attracting fresh MICE and business travel.

The months following these developments have witnessed a number of high-profile domestic MICE events such as the International Union of Architects Congress held in Durban in August 2014, the South African International Trade Exhibition in Johannesburg in June 2015, and the Cape Construction Expo and Conference held annually in Cape Town.

Cape Town

With hundreds of business-class hotels, 241 conference venues and stunning coastal views on offer, as well as a host of cultural and outdoor attractions, Cape Town is the top MICE destination in both South Africa and Africa. The city rose 11 spots on the ICCA’s cities list, and now stands at 41st place worldwide after hosting 58 international association meetings in 2014, compared to 45 in 2013 – just behind Vancouver, at 38th place and with 60 meetings, and Melbourne, at 37th place with 61 meetings. Cape Town is the number one international event destination in Africa, according to the ICCA; however, Johannesburg and Durban are hot on its heels and could soon challenge the city for MICE dominance.

Johannesburg & Durban

As the country’s economic hub and largest city, Johannesburg is the second-largest MICE destination in South Africa, and the city has witnessed substantial growth in MICE events in recent years, offering a host of knock-on benefits outside of tourism revenue.

According to a 2015 report published by Media Club South Africa, MICE events in Johannesburg frequently attract between 500 and 1000 international visitors who stay for an average of three to six days, while business tourism helps to promote the city as both a business and a tourism destination, and supports Johannesburg’s Growth and Development Strategy 2040, which targets transforming the city into a year-round business and events destination.

MICE growth in Johannesburg has shot up dramatically in recent years, with the ICCA announcing in May 2015 that Johannesburg had jumped from 136th to 101st place internationally in its city rankings in 2014.

“Johannesburg’s continued improvement in its ICCA rankings is thanks to a collaborative effort with our industry partners, peers and stakeholders, and confirms the city’s status as a world-class business destination,” mayor of Johannesburg Parks Tau told local media. The city has climbed a remarkable 133 places in the rankings since 2012, and has also risen from fourth to second largest MICE destination in Africa, outpacing Durban in fourth and Marrakech in third. Durban was ranked 125th internationally in 2014, tied with Auckland, Basel, Bordeaux and Montpellier.

Challenges

Despite its high growth prospects, the MICE sector is facing serious setbacks as a result of new visa regulations issued in May 2014, when the Department of Home Affairs gazetted two major changes: a requirement that all children under the age of 18 travelling to and from the country be in possession of an unabridged birth certificate as well as a passport, and a visa if necessary; and a stipulation that tourists from countries requiring a visa appear in person during the application process in order to obtain a biometric visa. Since the implementation of the new regulations, the country’s tourism sector has suffered a loss in tourist numbers.

“Negative effects are being reported by tour operators and airlines which have taken the form of cancellations,” Derek Hanekom, tourism minister for South Africa, said in June 2015 before calling for the new regulations to be reviewed.

The impact on Chinese tourism arrivals has been particularly negative; Statistics South Africa reported that the number of Chinese visitors to the country between February 2014 and February 2015 plummeted by 32.4%, compared to a 7.2% drop in tourist numbers overall. With Chinese tourists also representing a significant MICE cohort – the number of Chinese visitors to South Africa tripled between 2009 and 2013, while MICE China Magazine named South Africa its “Best International MICE Destination” in 2013 – the country’s business travel segment will also be affected by the new regulations.

Meanwhile, limited direct international connectivity is placing additional constraints upon MICE arrivals from China. In a 2014 report published by Business Day Live, Bradley Brouwer, South Africa Tourism’s regional manager for Asia Pacific, argued that the MICE segment will not reach its full potential without more direct flights between China and South Africa. South African Airways launched direct Beijing-Johannesburg flights in 2012, but then decided to halt the service in April 2015 due to unsustainable losses.

Although the WTTC projects business spending is poised to rise by 2.1% in 2015, and to expand by 3.9% annually until 2025, for a projected annual total of R124.7bn ($10.77bn), others are less optimistic. In its 2015 Tourism Business Index report for the second quarter, the TBCSA reported that out of a score of 100 (representing normal trading levels), the tourism industry performed significantly lower than reported overall, recording an index of 83.6, compared to analyst expectations of 97.3, and representing its lowest performance since the third quarter of 2011.

The council expects that tourism’s business performance in the third quarter of the year will also be below normal levels, at 80.6, while 34% of respondents surveyed reported that insufficient domestic business demand will be a significant negative factor for tourism growth in the coming months, and 25% reported that insufficient international business demand is also likely to have a negative impact.